Hong Kong: The World’s Window to Financial Play

Hong Kong: The World’s Window to Financial Play

By: Jessica Bernstein

November 12, 2024

Two weeks ago, I had the opportunity to join our founder and managing partner, Paul Schaus, as part of the U.S. Consulate’s Fintech Trade Mission to Hong Kong. On this trip, my first to Hong Kong, I learned that when constructing high-rise buildings near the mountains, it’s customary to incorporate large gaps, known as “dragon gates,” into their design. This allows for the dragon to see the view, enter, and exit freely. This is a gesture of respect to ensure his safe return. This cultural belief in Feng Shui weaves throughout Hong Kong, and it set me thinking about the connections between this philosophy and Hong Kong’s proactive approach to finance.

Our journey started at the Hong Kong Fintech Week Conference. The convention itself was brimming with familiar faces from banks and fintech firms, an impressive assembly of global powerhouses. Yet, we observed that the sessions had an air of predictability. Buzzwords like AI, sustainability, and tokenization echoed in every corner, and while these innovations hold vast potential, the enthusiasm felt somewhat rehearsed, and very few real use cases could be found. The drum ceremony that opened the conference was a spectacular prelude, charged with energy and production value, setting high expectations. The keynotes, though, didn’t quite match that intensity. The topics felt reminiscent of last year’s trends, or maybe even the last 3 years, leaving attendees with a sense of, “Heard it all before, but when are we going to really see it in action?”

However, our time in Hong Kong quickly evolved beyond the convention. We had the privilege of meeting with key financial stakeholders, including the Hong Kong Monetary Authority, executives from Citibank and HSBC, and representatives from the Hong Kong Stock Exchange. Our discussions with the Asia Securities Industry & Financial Markets Association and even an interview with Ming Pao Newspaper added further insight into the local financial ecosystem and media perspectives on fintech.

Each meeting revealed a side of Hong Kong that wasn’t visible from the surface. There seemed to be a determined drive to bridge innovative ideas with real-world applications, and quickly. Where the U.S. and other countries might hesitate or over-regulate, Hong Kong steps boldly forward. For fintech innovators, this more laissez-faire attitude creates an environment where change can flourish without excessive restraint.

In contrast to many parts of the world, where regulatory caution can slow progress, Hong Kong adopts a “let’s see how it goes” mentality, embracing the potential risks of emerging technologies. This city feels like much more than just a financial hub. It appears to act as a testing ground for ambitious ideas, a playground where both established and fledgling capital can experiment and thrive.

As we left Hong Kong, I thought of the dragon. If other countries’ strict financial constraints and regulatory standards were a giant mountain of limitation, Hong Kong is the window and a rare opening where fintechs, banks, and those shaping the future of money can freely play and experiment, and safely return home.

This is Part I of a two-part series recapping our experience attending this year’s FinTech Business Development Mission to Hong Kong and Thailand. Part II will share insights from our activities in Bangkok.


Pitfalls in Technological Preparedness

November 14, 2024

By: Tyler Brown

Banking Modernization

In CCG Catalyst’s New Frontiers Survey 2024, which surveyed C-suite executives at US financial institutions (FIs), nearly half of respondents claimed their bank was generally technologically prepared to handle the next five years. Another 31% said they would likely outpace the competition. These numbers together suggest comfort and confidence with technological capabilities across our respondent base. But perception doesn’t necessarily reflect reality. FIs must clearly and consistently define technical readiness in the context of infrastructure needs, customer demand, and competition to know their position.

Here are three common pitfalls when assessing preparedness:

Assuming that a working tech stack is enough. Aging core systems built up over many years accommodate basic modern experiences, like mobile banking, and can continue to fulfill the bank’s basic functions. But a tech stack dominated by legacy systems may lack the extensibility and scalability to change quickly and robustly in response to new technologies and evolving customer needs. A need to make meaningful changes could very well eliminate an illusion of preparedness.

Defining competition too narrowly. As we’ve written, community bankers in general see other community banks as chief competitors, followed by other traditional banking institutions with a physical in-market presence. However, as we’ve also covered, under many circumstances, nonbank apps are also a substantial threat to FIs’ relationships with their customers. Being prepared technologically requires understanding the capabilities of all of your competitors and how they might change customer expectations.

Benchmarking technology in a way that isn’t relevant to the business. Customer demand should be the ultimate arbiter of technology choices. Blindly checking boxes is a quick way to buy functionality that doesn’t matter much to customers and makes it hard to enforce discipline in cutting functionality when it’s no longer useful. It’s tempting to use megabanks’ offerings as the gold standard for the customer experience, but FIs with smaller budgets need to be efficient with their choices using the needs of their market.

Intellectual honesty and the right frame of reference are fundamental to modernization, which forms the foundation for the technical flexibility and operational sophistication needed to innovate. A past survey of ours asked an open-response question about respondents’ definition of “digital transformation,” and many responses were tactical, such as digital channels, automation, analytics, and cloud. It’s prudent for bankers to grasp the technology practices they should reinforce and the changes they should make, but that view needs a broader, strategic lens. Commitment to innovation, a philosophy that considers best-of-breed solutions, and productive relationships with fintechs are crucial.

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